The pandemic came on the heels of the Financial Crisis of the late 2000s, which unleashed a wave of financial regulation. Those regulations significantly changed compliance expectations for your clients – even those not in the financial industry. Complying with the rules can be difficult – and not just when a lot of new ones come down the pike. Compliance is especially difficult when clients ignore these top compliance threats.
Compliance threats didn’t come out of thin air.
Not just external rules, either. You know that clients often develop their own set of policies, procedures, and by-lines.
Compliance with these internal mandates have cost implications, as well – both in terms of time and money. Australian enterprises alone spend around 155 billion to administer and comply with self-imposed rules and regulations, according to Deloitte.
Indeed, these rules are meant to improve the well-functioning of companies. That doesn’t make them simple to comply with. What can help?
Not all compliance threats are made equally. These are the most salient.
Understanding the threats your clients face to compliance management should help improve the quality of monitoring and assessing the systems, tools, and structures needed to adhere to rules and regulations, internal and external.
What are the top compliance threats? They include the following:
- The lack of an overarching framework for compliance. From third-party auditors to internal GRC departments, your clients pay a lot of money to get things right. The question is, though, do their investments hold up?
The consensus is no. Clients often allocate resources to governance, risk and compliance without having first developed an enterprise-wide framework.
The lack of an overarching framework means that a piecemeal approach to compliance often takes over, one in which individual teams begin managing specific requirements as they see fit – usually with a different set of roles, activities, and systems. - Siloed functions and disconnected systems limit visibility. Why does it matter? Besides being costly and ineffective, the piecemeal approach inevitably limits the situational awareness of senior leaders, whose statutory responsibility it is to manage compliance threats.
Clients can only meet their obligations, though, if they have an accurate picture of risk. Siloed functions and disconnected systems limit that visibility, driving up costs and creating work duplications in the process.
In fact, clients might end up paying double for advanced compliance management systems that perform the same functions but aren’t configured to exchange relevant data. - Manual processes. That is when the systems are digitised at all. Often, compliance management is overwhelmingly manual, with clients reliant on spreadsheets, word processing, and shared folders.
A fledgling company might get by like that. The home-spun structures, however, won’t scale as clients get larger, with more onerous reporting requirements. - Rapidly changing regulatory picture. And, of course, the sheer volume of regulation a client must comply with also makes compliance risk management more operationally complex.
More regulation will often mean more resources needed to implement changes. Resources aren’t always available or adequate to clients, rendering it difficult to meet regulatory expectations.
The inability to meet expectations, then, ups the potential for increased supervision (not to mention sanction) from regulators.
Unfortunately, the regulatory picture is likely to get even more complex in 2022. For clients, therefore, it’s imperative to pursue effective strategies to get compliance management right. What are the strategies? Download our guide to the top compliance management threats and strategies to address them for more.
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